Tag Archives: Identity Theft

If you’re still keeping old tax returns and receipts stuffed in a shoe box stuck in the back of the closet, you might want to rethink that approach.

You should keep your tax records safe and secure, whether they are stored on paper or kept electronically. The same is true for any financial or health records you store, especially any document bearing Social Security numbers.

You should keep always keep copies of your tax returns and supporting documents for several years to support claims for tax credits and deductions.

Because of the sensitive data, the loss or theft of these documents could lead to identity theft and have an economic impact. These documents contain the Social Security numbers of you, your spouse and dependents, old W-2 income and bank account information. A burglar could easily turn your old shoe box full of documents into a tax-related identity theft crime.

Here are just a few of the easy and practical steps to better protect your tax records:

· Always retain a copy of your completed federal and state tax returns and their supporting materials. These prior-year returns will help you prepare your next year’s taxes, and receipts will document any credits or deductions you claim should question arise later.

· If you retain paper records, you should keep them in a secure location, preferably under lock and key, such as a secure desk drawer or a safe.

· If you retain you records electronically on your computer, you should always have an electronic back-up, in case your hard drive crashes. You should encrypt the files both on your computer and any back-up drives you use. You may have to purchase encryption software to ensure the files’ security.

· Dispose of old tax records properly. Never toss paper tax returns and supporting documents into the trash. Your federal and state tax records, as well as any financial or health records should be shredded before disposal.

· If you are disposing of an old computer or back-up hard drive, keep in mind there is sensitive data on these. Deleting stored tax files will not remove them from your computer. You should wipe the drives of any electronic product you trash or sell, including tablets and mobile phones, to ensure you remove all personal data. Again, this may require special disk utility software.

The IRS recommends retaining copies of your tax returns and supporting documents for a minimum of three years to a maximum of seven years. Remember to keep records relating to property you own for three to seven years after the year in which you dispose of the property. Three years is a time frame that allows you to file amended returns, or if questions arise on your tax return, and seven years is a time frame that allows filing a claim for adjustment in a case of bad debt deduction or a loss from worthless securities.

As we all know it is Tax Season and we are always here to help! Please contact us today at (877)305-1040 or (310)820-1080 or email us at info@onts9.com for more information and let us do the job for you and make sure you are in good hands.

The Internal Revenue Service opened 1,100 criminal investigations of tax fraud by June 30 of this year, exceeding the 2012 total with three months remaining in the fiscal year.

The agency has doubled the number of employees working on tax-fraud cases to more than 3,000 and is approaching last year’s total of 5 million suspicious tax returns rejected, interim IRS leader Danny Werfel told a congressional committee today in Washington.

Those efforts would be complicated by additional budget cuts proposed in Congress, Werfel said. A budget cut of about $1 billion since 2010 has led the agency to cut about 8 percent of its full-time staff, or about 8,000 workers, he said.

With further cuts, “we would no longer be able to sustain our current level of effort on identify theft without significantly weakening other programs,” Werfel said.

House Republicans have proposed reducing the agency’s budget by 24 percent.

Werfel’s testimony to a subcommittee of the House Oversight and Government Reform panel comes as the agency is mired in controversies over its scrutiny of Tea Party groups, spending on conferences and payment of bonuses to agency officials.

President Barack Obama forced out Werfel’s predecessor, acting IRS commissioner Steven Miller, and yesterday nominated John Koskinen to take over the agency.

“Refund fraud caused by identity theft is one of the biggest challenges facing the IRS today,” Werfel told the House subcommittee.

Death Records
Criminals with access to taxpayers’ identifying information—sometimes from death records or employer payroll files—can create fraudulent tax returns and obtain refunds before the actual taxpayer is aware of the theft.

Obama’s 2014 budget plan included proposals to curb a rise in identity theft occurring through tax returns. It called for a $5,000 civil penalty for tax-related identity theft, restricting access to Social Security death records and allowing employers to avoid putting Social Security numbers on W-2 wage reporting forms.

For fiscal year 2012, the IRS’s identity-theft unit received about 450,000 cases, up 78 percent over the previous year, according to the National Taxpayer Advocate, an independent organization within the agency. This year, the IRS has resolved 565,000 cases, Werfel said.

The Internal Revenue Service has issued proposed regulations to create a new taxpayer identifying number known as the IRS Truncated Taxpayer Identification Number, or TTIN, that can be used instead of a Social Security number in response to the growing problem of identity theft-related tax fraud.

The TTIN would provide an alternative to using a Social Security number (SSN), Individual Taxpayer Identification Number (ITIN), or IRS Adoption Taxpayer Identification Number (ATIN). The filer of certain information returns would be able to use a TTIN on the corresponding payee statements to identify the individual being furnished a statement. The TTIN would display only the last four digits of an individual’s identifying number and is shown in the format XXX-XX-1234 or ***-**-1234.

The IRS has been struggling to curb identity theft. From 2008 through the middle of 2012, the IRS identified more than 600,000 taxpayers who have been affected by identity theft. Last tax season, the IRS added filters to its system to check for signs of identity theft, stop suspicious tax returns and contact the taxpayer before the return is processed, but that in turn led to delayed tax refunds for millions of taxpayers (see Fraudulent Tax Refund Attempts Caused Delays for Legitimate Taxpayers in 2012). The IRS has also enhanced the use of Identity Protection Personal Identification Numbers for identity theft victims.

In 2011 the IRS protected $1.4 billion in refunds from being erroneously sent to identity thieves, according to the IRS Advisory Council. Through mid-April 2012, the IRS had stopped over 325,000 questionable returns with $1.75 billion in claimed refunds using filters specifically targeting refund fraud.

However, the impact of identity theft on tax administration is significantly greater than the amount the IRS detects and prevents, according to the Treasury Inspector General for Tax Administration. TIGTA’s analysis of tax returns using characteristics of IRS-confirmed identity theft has identified approximately 1.5 million tax returns with potentially fraudulent tax refunds totaling in excess of $5.2 billion. TIGTA estimates that the IRS could potentially issue $21 billion in fraudulent tax refunds over the next five years as a result of identity theft.

The IRS’s proposed regulations would affect the filers of certain information returns who will be permitted to identify an individual payee by use of a TTIN on the payee statement furnished to the individual, and those individuals who receive payee statements containing a TTIN. The TTIN can be used in payee statements on 1099, 1098 and 5498 series forms, except for the 1098-C. The IRS has already begun testing the use of the TTIN under a 2011 pilot program.

A former Internal Revenue Service employee has been sentenced to two years in prison for identity theft and filing fraudulent income tax returns.

George Albright, 57, of Antioch, Tenn., was sentenced last week by a federal judge in in Nashville after he pleaded guilty in May to one count of filing a false tax return and one count of using the identities of others to do so.

Albright was employed by the IRS as a taxpayer service representative from 1995 until March 2012. He admitted that, between February 2008 and January 2011, he used his position as an IRS employee to obtain the names and identifiers of taxpayers from IRS records. He then used this information to file several fraudulent federal income tax returns. Albright directed that the tax refunds from those returns, totaling $9,669.00, be electronically deposited into bank accounts under his control.

In imposing the two-year sentence, U.S. District Judge Todd Campbell noted that Albright, who has no prior criminal history, had engaged in an egregious abuse of the public trust.

“Tax fraud, or any crime committed by a government employee, occupies a high priority for federal investigators and prosecutors in this district,” said U.S. Attorney Jerry Martin in a statement. “Anyone filing a fraudulent tax return and anyone employed in a position of public trust should take note of the prison sentence they risk if they engage in this sort of criminal conduct, even if they have no criminal record. They should also be reminded that there is no parole in the federal system.”

Albright will remain under federal supervision for one year after completing his prison sentence. He was also ordered to forfeit the computer that he used to commit the crimes and will be required to repay the tax refunds he stole.

The Internal Revenue Service and the Social Security Administration were urged during a congressional hearing Tuesday to take further steps to curb identity theft-related tax fraud.

IRS deputy commissioner of services and enforcement Steven T. Miller acknowledged the problem, but responded that in some cases tax preparers might have bank accounts that receive multiple tax refunds. Families and Indian tribes might also have such accounts.

National Taxpayer Advocate Nina Olson noted that taxpayers might need to wait months longer to get their tax refunds if the IRS were to put in place the proper identity theft safeguards. In some cases, that led to tax refund delays this tax season because of the identity theft filters used by the IRS.

Olson said she is concerned about the IRS’s ability to develop procedures to promptly assist taxpayers who are victimized by identity theft, in part because of how the IRS has handled a related issue involving fraud by tax return preparers. “The IRS has struggled to unwind the harm done to victims—even when it had plenty of time to develop procedures,” she said. “More specifically, [the Taxpayer Advocate Service] has received a significant number of cases involving preparer refund fraud. These preparers alter taxpayers’ returns by inflating income, deductions, credits or withholding without their clients’ knowledge or consent, and pocket the difference between the revised refund amount and the amount expected by the taxpayer. The IRS ultimately discovers that the taxpayer’s return is incorrect and attempts to recover the excess refund from the taxpayer through levies, liens and other enforcement actions. In one egregious instance involving several returns prepared by the same tax return preparer—and despite the IRS’s concurrence that the returns it processed were not the returns signed by the taxpayers—our Local Taxpayer Advocate could not persuade the IRS Accounts Management function to adjust the taxpayers’ accounts to remove the fabricated income or credits.”

The Internal Revenue Service has increased its battle against identity theft, creating a special section on its Web site dedicated to helping growing numbers of tax fraud victims.

The new section includes tips for taxpayers and a special guide to assistance, ranging from contacting the IRS Identity Protection Specialized Unit to tips to protect against “phishing” schemes. The IRS said it is also taking further steps this tax season to prevent identity theft and detect refund fraud before it occurs.

In late 2011, a group of taxpayers received a special Identity Protection Personal Identification Number, or IP PIN, for use in filing their tax returns for this filing season. The IRS is also working to speed up case resolution, provide more training for employees who are supposed to assist identity theft victims, and increase the agency’s outreach to taxpayers.

Fighting identity theft will be an ongoing battle, however, the IRS acknowledged. Identity thieves continue to create new ways of stealing personal information and using it for their gain. Identity theft cases are among the most complex types of incidents handled by the IRS, but the agency said it is continually reviewing its processes and policies to minimize the incidence of identity theft and to help those who find themselves victimized by it.